How much debt do I owe?

What loans should I consolidate?

Loan consolidation works for some recent graduates, but not all. Direct loans taken after 2006 should not be consolidated. However, if you carry undergraduate debt or Federal Family Education Loans, consolidation may provide benefits.

What repayment plan works best for me?

Income Based Repayment (IBR) and the improved new Pay As You Earn (PAYE) plan provide much-needed relief in the early years of practice and for those who choose public service careers. These two income-based repayment plans are the best bet for most recent graduates. However, if you hold less than the equivalent of one year’s salary in loan debt, a straight repayment plan such as Standard or Extended repayment may be right for you.

If your loan amount exceeds your anticipated first year salary, IBR or PAYE is the way to go. Contact your loan servicer to request an income-based repayment plan. You must document your income each year. Failure to complete the required annual paperwork may temporarily place you into a flat 10-year repayment plan that may exceed your ability to pay.

How long will it take me to pay off my debt?

Payment depends on income level and will vary as your income increases. However, there are three basic time frames for repayment under IBR:

Income Based Repayment (IBR)

For borrowers with federal loans obtained before October 1, 2007

25 years (unless paid off earlier)

Pay As You Earn (PAYE)

For borrowers with no federal loans as of October 1, 2007

20 years (unless paid off earlier)

Public Service Loan Forgiveness (PSLF)

For full-time employees of government agencies and 501(c)(3)s with loans in IBR or PAYE

10 years (unless paid off earlier)

If you comply with the documentation requirements and reach the end of the above time periods, the rest of your loan debt will be forgiven. PSLF is tax-free, but IBR and PAYE plans will be taxed at your marginal income tax rate. Contact your financial planner or tax professional to discuss tax and other financial implications, as circumstances vary over time.